Advertisers can get the most return on their Internet advertising investments by using better metrics for sourcing, according to Wharton marketing Professor Ron Berman. His research reveals the “last touch” or “last click” method preferred by advertisers is unproductive.

In essence, Professor Berman maintains the “last click” has a moral implication because the ads shown to site users are meaningless in that they’d purchase the products anyway.

He says the competition from site publishers “creates a race to try and cheat the advertiser out of money,” and he explains his research in the following video.

Dr. Berman believes advertisers can better profit using a compensation metric – one that rewards “effort” over “performance.”

He suggests “paying for exposures is more efficient and more profitable for the advertisers than paying a commission on sales.”

The professor offers an example of consumers deciding to buy shirts at the Gap. Hypothetically, he points out that Gap ads appear over countless Web sites. But he cites what he calls an “attribution problem.”

So he presents advertisers with a quandary.

“If, in the end, the consumer did buy the shirt, how do you measure the effectiveness of each one of those ad exposures the consumer had?” he asks.

In essence, Professor Berman maintains the “last click” has a moral implication because the ads shown to site users are meaningless in that they’d purchase the products anyway.

“If I, as a consumer, saw 17 different ads on 17 different websites and purchased a product, the last ad I saw before purchasing the product [would] get all of the credit for the sale,” he says.

“My research [attempts] to determine [if] this method is efficient or not, and its impact on different types of advertisers and publishers in the online marketplace,” he adds.

His research asks questions:

“Is this last click method, which is used by the majority of advertisers, efficient? Why do they use this method? It is counter-intuitive. Why would they look only at the last ad that the person sees?

“I compare two types of compensation scales that are used online. One is paying for every experience of an ad being seen, and [the other] is paying just for every sale, like a commission on a sale that the publisher gets from the advertiser.”

Exposures vis-à-vis sales

“My key takeaway is that paying for exposures is more efficient and more profitable for the advertisers than paying a commission on sales. Most people think if you compensate a salesperson, you should pay a commission only when they make sales, and not when they show up for work.

“But if you compensate a publisher, say Facebook, you can pay Facebook for just showing the ads, or generating sales.”

He argues when two publishers carry the ad, one of them is getting a “free” ride. He maintains both shouldn’t get credit.

Competition

“The second [takeaway] is that the last click method creates competition between publishers that [in turn] creates a race to try and cheat the advertiser out of money,” he says. “But maybe they didn’t cause any of those sales that just happened to be the last ones.”

So he believes it’s more profitable for advertisers to pay for impressions or exposures than commissions.

Caveat

He admits there are occasions when last click or last touch is effective for advertisers.

“If you ask advertisers, ‘Why do you use Last Click and Last Touch?’ typically they say it’s the best method they’ve known so far. But I can show that, if it happens that your campaign has these specific conditions, it’s better to use Last Touch. When the first ad has the biggest impact … and not that [much with] the others, and consumers don’t visit the website too often, then the Last Click method is very efficient.”

No matter what methodology an advertiser negotiates from a publisher, Professor Berman points out the publisher will strategize to take advantage.

“The idea is to sit down with the publishers and with the company you’re using for doing the attribution, and think, ‘does this model that they’re using make sense to my consumers?’ Also, design an experiment and ask, “What would happen [in] using an attribution method, and what would happen without using it?” he points out.

Re-targeting ads

Professor is critical of the practice known as re-targeting – ads Internet users see after make a purchase. He says they have no positive effect on such consumers.

“Typically, [re-targeting ads are] not that good,” he concludes.

My sense: Watch the video of the good professor. He has some intriguing research to consider.

From the Coach’s Corner, here is related information on Internet advertising:

9 Tips to Evaluate Online Advertising Options — Are you at a point at which you want to advertise your company on the Internet? But you’re unsure which sites are the best for you? The options are endless and can be confusing. The last thing you want to do is to market a product or service that doesn’t reach the right people.

Internet Shoppers Demand 3 Cs – Customer Experience Study— Success in e-commerce is increasingly challenging for retailers that want to dominate in brand preference, customer loyalty and word-of-mouth advertising. That’s because consumers want more and more in the three Cs — channels, choices and convenience.

8 Ways to Get Transparency from Your Retargeting Campaign — If you’re a major advertiser, you probably use behavioral remarketing or retargeting strategies. That’s to reach prospective customers based on their Internet searches, if they leave your Web site and don’t buy from you. Other firms use retargeting to purchase advertising. Basically, retargeting is accomplished by using a cookie or pixel, to show banner ads to Internet users. But transparency is a significant problem for advertisers.

10 Strategies to Shine and Make Ad Designing a Breeze — Designing simple banner ads without strategic planning no longer suffices. The click rates have declined significantly, especially in B2B. To shine in the clutter of Internet advertising, there are at least 10 tips to keep in mind. That’s true in your mobile or Web site strategies.

“Never stop testing, and your advertising will never stop improving.”

-David Ogilvy

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.